1 Comments on the 2015/6 DoRB Select Committee on Appropriations 07 November 2014 by Councillor Subesh Pillay 1

SALGA appreciates and welcomes the opportunity to share her views and comments on the Division of Revenue Bill (DoRB) as was presented by the Minister of Finance during the tabling of the Medium Term Budget Policy Statement on the 22 nd October We wish to state upfront that as is required by law and leading up to the presentation of the MTBPS, SALGA did extensively engage with National Treasury, the FFC, DCoG and other stakeholders on matters pertaining to the fiscal state of the country and the budget allocation proposed We have during these engagements made inputs pertaining to local government funding, the vertical division of revenue (the equitable share arrangement) and support going to Local Government through conditional grants Most pertinently, SALGA participated in the Budget Forum convened by the Minister of Finance on the 29 th September 2014 where most issues related to the DoRB were discussed. Introduction 2

SALGA is cognizant of the precarious state of our country’s finances, our debt burden, and the competing needs for our limited resources We are aware and mindful of the need to strategically leverage the limited resources to drive the NDP and to secure the fundamentals that will put our country on a developmental trajectory and address the trifecta of poverty, unemployment and inequality Within this context, we contend however that it is in everyone’s interest to ensure that LG is properly resourced and capacitated to meet her developmental challenges Gone are the days of an adversarial relationship when it comes to LG funding, we have to find enduring solutions and make provisions for the equitable distribution of resources so that the challenges that face us all are properly addressed Accordingly, in this submission we wish to highlight some pertinent matters that seek to demonstrate our positive take not just on the DoRB but in working with other spheres to address issues pertinent to LG resourcing Background 3

– With regards to the DoRB specifically, we note the following: An optimum funding arrangement for local government is still work in progress Revenue generation instruments, especially for metros and district municipalities are still a subject of discussion and investigation The management of creditors and debtors in the sector is a matter that warrants creative management and urgent resolution as it bears negatively on local government finances The capacity to manage allocated resources as periodically monitored through MFMA section 71 reports indicates an ever increasing need to make use of the limited resources allocated, spend these wisely and strategically, and continue to assert a need for further allocations where there are clear funding gaps General Comments on DoRB 2015/6 4

General Comments on DoRB 2015/6 5 – We note that in the 2015/16 money bill not all the issues that SALGA would have wanted to see funded are funded as such We are though satisfied to note that the equitable share remains constant and has been adjusted in line with the CPIX We note the decrease in grants funding in line with the performance of some of these We note the overall decrease in LG funding alongside those of other spheres – We do note and welcome the new Demarcation Transitional Grant – The issue of the Human Settlements Development Grant is a matter on on-going discussion between SALGA, NT and the Human Settlements Department and further work in refining the allocation and management of this grant is continuing

SALGA has commented extensively on the recommendations by the FFC on the Division of Revenue – We have highlighted the need to collectively define what we mean by financial and economic viability of municipalities – We have raised an issue at the Budget Forum about ensuring a diverse range of revenue generating instruments for our metros and secondary cities – We have proposed increased fiscal support for small rural municipalities with limited tax base – We have called upon Treasury and the FFC to investigate together with us a workable district revenue generation and funding model General Comments on DoRB 2015/6 6

The 2015/16 financial year has to enjoin us all to work towards resolving: – The unintended fiscal gap arising out of the amended Property Rates Act especially insofar as it excludes state facilities from paying rates – The issue of state indebtedness to municipalities. We are satisfied with the goodwill and the joint work we are doing with the Department of Public Works to address this matter – The Committee might have noted the widely reported MoU between SALGA and Eskom to jointly work on resolving issues pertaining to municipal debt to this state entity. We will investigate a similar arrangement with the Water Boards – Alongside these initiatives we are upscaling our work in investigating the billing systems of municipalities. Once completed, we hope that we could finally crack this perennial problem that was highlighted by the President during the State of the Nation Address General Comments on DoRB 2015/6 7

As we continue to articulate the need for increased LG funding, we are equally mindful of our responsibility to ensure better management of these resources – Accordingly, in 2015/16 SALGA will invest more in monitoring the performance and capacitation of municipal oversight structures such as MPACs, Audit Committees and the Internal Audit function – Equally, we will continue engaging with NT and DCoG on the matter of unfunded and underfunded mandates as was agreed upon at the Budget Forum – We do welcome as well the agreed upon arrangement of having two Budget Forums a year, one focussing specifically on LG. – We intend using this for better engagement, scoping of the issues and collective resolution on matters that will find space in the DoRB in subsequent years. General Comments on DoRB 2015/6 8

Conclusion In conclusion, SALGA notes and welcomes the DoRB 2015/16 –We equally note the ongoing work on finding solutions to local government funding and capacity building –We do note the fiscal constraints on our budget and the implications of these for local government in particular –We will continue engaging with others on fiscal and funding gaps experienced by municipalities and ensure that the developmental role of local government is not compromised 9